I am often asked to give my opinion on the issues facing a new online business today. I think the biggest change is a loss of the protections arising from your traditional neighborhood and community. Let's travel back in time and see what I mean.
It's 1990, and you want to start a business. Everyone needs a good accountant and lawyer, you are told. So, you go visit an attorney down the street and he sets you up with a corporation, explains business license and employment rules, and reviews your standard contract. Now, all you need to do is lease that retail space! Your family accountant puts you in touch with a leasing agent. You are ready for your retail store lease to require a hefty deposit and a three year commitment with your personal guarantee for monthly payments. For the budding entrepreneur in days past the legal needs did not require a great financial commitment, but the lease did. And if you ever got sued, your local lawyer could easily handle the matter for you at little expense.
It's 2007, and starting a business has never been easier. Just go and start up an online store for next to nothing and start selling. But something has indeed changed. The days of going to your local lawyer for legal guidance and advice are over. Now, you must consider complying with the laws of every state in which you have customers and/or are advertising online. You are faced with issues that are complex and require specialists. The worst thing that can happen is for you to be sued individually in a far off venue! (You are not going to be sued in your hometown anymore.) And the cost of the defense of federal lawsuits dealing with Internet and intellectual property issues can go into the six figures pretty easily.
Today a business can be launched on a very small budget, but the risks have never been higher. Smart entrepreneurs know that quality legal work up front is worth the price even though everything about launching a web business seems to focus on low cost. Things have changed dramatically, and the days of having comfort that your reputation, honesty, ethics, and offline community will protect you from attack by outsiders is, unfortunately, a thing of the past.
So, when I am asked by the next small business person whether it is easy and cheap to launch an online business, my response is that it depends on what you have to lose, and whether you feel lucky.